287

1 Ch.
A [COURT OF APPEAL]
A.J . DUNNING & SONS (SHOPFITTERS) LTD. v. SYKES & SON
(POOLE) LTD.
[1982 D. No. 9]
B
1986 Oct. 16, 17; 30 Sir J ohn Donaldson M.R.,
Dillon and Croom-J ohnson L.J J .
Land RegistrationRegisterImplied covenantTransferVendor
transferring parcels of land to purchaserInaccurate plan attached
to transferLand not owned by vendor apparently included in
parcels transferredWhether parcels transferred included land to
C which vendor had no titleWhether vendor in breach of covenants
of good title to be implied into transferWhether title of true
owner charge or interest on "register" subject to which covenants
of good title taking effectLand Registration Rules 1925
(S.R. & O. 1925 No. 1093 (L.28)), rr.76, 77(l)(a)
The Land Registration Rules 1925 provided by rule 77:
p "(1) Any covenant implied by virtue of section 76 of the
Law of Property Act 1925, in a disposition of registered land
shall take effect as though the disposition was expressly
made subject to(a) all charges and other interests appearing
or protected on the register at the time of the execution of
the disposition and affecting the title of the covenantor; . . . "
The defendants as beneficial owners transferred to the
P plaintiffs land described in a clause in the transfer as "all that
freehold property edged with red on the plan annexed hereto
being . . . part of the freehold property registered at H.M.
Land Registry under title number P7608." The annexed plan
appeared to include within the red edging a piece of land to
which the defendants, having previously sold it to someone else,
no longer had title. The plaintiffs subsequently claimed damages
against the defendants for breach of the covenants for title to be
F implied into the transfer by virtue of section 76 of and Schedule
2 to the Law of Property Act 1925,
1
section 38(2) of the Land
Registration Act 1925
2
and rules 76
3
and 77 of the Land
Registration Rules 1925. The judge found that the transfer had
purported to include land to which the defendants had no title,
but held that by virtue of rule 77(l)(a) of the Rules of 1925, the
defendants' implied covenants for good title took effect subject
to the registered title of the true owners of that part of the land
G which was not the defendants', and that therefore they were not
liable.
1
Law of Property Act 1925, s.76: "(1) In a conveyance there shall . . . be implied, a
covenant . . . by each person who conveys, as far as regards the subject-matter or share of
subject-matter expressed to be conveyed by him, with the person . . . or with the persons
. . . to whom the conveyance is made . . . that is to say: (A) In a conveyance for valuable
consideration . . . a covenant by a person who conveys and is expressed to convey as
J J beneficial owner in the terms set out in Part I of Schedule 2 to this Act; . . ."
Sch. 2: see post, p. 297B.
2
Land Registration Act 1925, s. 38: "(2) Rules may be made for prescribing the effect
of covenants implied by virtue of the Law of Property Act 1925, in dispositions of
registered land."
3
Land Registration Rules 1925, r. 76: see post, p. 297E-F.
288
A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
On appeal by the plaintiffs: ^
Held, (1) (Sir John Donaldson M.R. dissenting) that by
using as a primary description the coloured edging on the
attached plan to differentiate parts of the land registered under
title No. P7608, the transfer did purport to include in the
parcels transferred land, within the red edging on the plan, to
which the defendants had no title; and that, accordingly, the
judge had been correct in his construction of the transfer (post,
pp. 299B-G, 302G-H). B
(2) Allowing the appeal, that the purpose of rule 77 of the
Rules of 1925 was to limit the scope of covenants of title,
implied into the transfer by the legislation, by making them
subject to, inter alia, existing interests appearing on "the
register"; that in the context of rule 77(l)(a) "the register"
meant only the register of that land under the title number
concerned in the transfer, not the global register of all land nor y~,
even the property register of any adjoining land which, by
virtue of rule 288, contracting purchasers were empowered to
inspect; that, therefore, the title of the true owners of that land
purportedly included in the land edged red on the transfer was
not an interest appearing on the register subject to which the
defendants' covenants for good title took effect; and that,
accordingly, the defendants were liable for breach of covenant
and the case would be remitted for an inquiry as to the damages D
payable (post, pp. 299H300B, E-G, 301B-H, 302G-H, 303C, E).
Decision of Mr. Donald Rattee Q.C. sitting as a deputy
judge of the Chancery Division reversed.
No cases are referred to in the judgments.
The following cases were cited in argument: E
Bortnan v. Griffith [1930] 1 Ch. 493
Page v. Midland Railway Co. [1894] 1 Ch. 11, C.A.
Strand Music Hall Co. Ltd., In re, Ex parte European and American
Finance Co. Ltd. (1865) 35 Beav. 153
Willson v. Greene [1971] 1 W.L.R. 635; [1971] 1 All E.R. 1098
p
APPEAL from Mr. Donald Rattee Q.C, sitting as a deputy judge of
the Chancery Division.
By writ and amended statement of claim of 22 J anuary 1982, the
plaintiffs, A.J . Dunning & Sons (Shopfitters) Ltd., claimed against the
defendants, Sykes & Son (Poole) Ltd., that by a transfer dated
7 September 1978 and made in consideration of the sum of 80,000 paid
by the plaintiffs to the defendants, the defendants as beneficial owners G
purported to transfer to the plaintiff the freehold property edged in red
on the plan annexed thereto; that by virtue of section 76 of the Law of
Property Act 1925 there were implied into the transfer the covenants set
out in Part I of Schedule 2 to the Act of 1925; that at the date of that
transfer the piece of land shown coloured yellow on the plan was not
vested in the defendants and accordingly the defendants had no right to
convey and failed to convey it to the plaintiffs; that on the true
construction of the contract for the sale of the land edged in red on the
plan, the yellow land was included therein; but that if on the true
construction of the transfer the yellow land was not included, then that
289
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.)
A transfer failed to give effect to the contract and the transfer ought to be
rectified accordingly; that by reason of the fact that the yellow land
appeared to have been included in the red land on which the plaintiffs
intended to and did construct an industrial building, the plaintiffs had
suffered loss and damage, namely the cost of purchasing the yellow land
from its true owners; and the plaintiffs claimed the sum of 10,111-95,
damages for breach of contract, rectification of the transfer to include
B the yellow land, costs and interest.
By amended defence of 18 March 1982, the defendants denied
that the transfer of 7 September 1978 purported to transfer the yellow
land but averred that if the transfer did purport to transfer the yellow
land then the implied covenants, which it was admitted applied to the
defendants' land, did not apply to the yellow land or if they did then
Q there had been no breach of them; and that if the plaintiffs had suffered
loss and damage the defendants were not liable. The defendants
counterclaimed rectification of the transfer by removal of the yellow
land.
On 12 July 1985, Mr. Donald Rattee Q.C. found that the transfer of
7 September 1978 did purport to include in the red land transferred the
yellow land to which the defendants had no title but held that on the
D true construction of, inter alia, rule 77(l)(a) of the Land Registration
Rules 1925, the defendants were not in breacji of any implied covenant
in relation to the yellow land. He therefore dismissed with costs both
the claim and the counterclaim.
By notice of appeal of 15 August 1985, the plaintiffs appealed on the
grounds that the judge was wrong in law in holding that by virtue of rule
g 77(1) of the Rules of 1925, the covenants implied into the transfer took
effect as though the transfer was expressly made subject to the
registration of the yellow land, and that he ought to have held that on
its true construction rule 77(l)(a) only applied to charges and other
interests appearing or protected on the register of the title with which
the parties to the transfer were dealing. Alternatively, the judge ought
to have held that the registration of the yellow land did not constitute it
F a charge or other interest for the purposes of rule 77(l)(a).
By respondents' notice of 18 September 1985, the defendants gave
notice of their intention upon the hearing of the plaintiffs' appeal to
contend that the judge's decision should be confirmed on the additional
or alternative grounds that the transfer did not purport on its true
construction to transfer the yellow land; that the plaintiffs' claim for
^ rectification of the transfer to include the yellow land should be
dismissed; but that if, contrary to the defendants' contentions, the
transfer did include the yellow land then the judge was wrong to reject
the contention of the defendants that if any covenant for title was to be
implied in the transfer in relation to the yellow land then the same was
not breached by the defendants because on its true construction the
transfer purported to transfer only such title as the defendants in fact
H had to the yellow land.
The facts are stated in the judgment of Dillon L.J .
Peter Rawson for the plaintiffs. On the appeal: the effect of rule
77(l)(a) of the Land Registration Rules 1925. (a) The position in
290
A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
relation to unregistered land is clear. If a vendor purports to sell a piece \
of land, to which he has at one time had title but which he has sold off,
he will be liable under the covenant for full right to convey. This is so
even if the purchaser is aware that the vendor has no title: Page v.
Midland Railway Co. [1894] 1 Ch. 11. (b) Rule 77(l)(a) is concerned
with "charges and other interests." In the case of the "yellow land,"
what was registered under the title of the proprietor was an estate in the
land and not a charge or interest (see Land Registration Act 1925, "
section 3(xi) which in the definition of "legal estates" refers to "estates,
interests and charges"), (c) Where rule 77(l)(a) refers to "all charges
and other interests appearing or protected on the register," it is referring
only to charges and interests which appear on the register of the title
with which the vendor is dealing and which the purchaser can check by
inspection of the register. It was not the intention of the legislature that Q
the purchaser should, for the purposes of the covenants for title, take
subject to everything affecting the land which appears on the register of
other proprietors, but not on that of the vendor. The judge's conclusion
on this point was wrong, (d) The scheme of land registration under the
Act of 1925 provides for a register to be kept in three parts, the
property register, the. proprietorship register and the charges register.
The title to each registered property is required to bear a distinguishing D
number (Land Registration Rules 1925 rule 2). (e) The property register
is required to show notes relating to "easements rights privileges
conditions and covenants for the benefit of the land" (see rule 3(2) of
the Rules of 1925). The charges register is required to contain
incumbrances and notes relating to covenants conditions and other rights
adversely affecting the land (see rule 7). These are the "charges and
other interests" with which rule 77(l)(a) is concerned, (f) Where
registered land is to be sold, the procedure is for the vendor to give the
purchaser authority to inspect the register: see section 110. Section 112
of the Land Registration Act 1925 provides that any person authorised
by a registered proprietor of any land or charge "may inspect . . . any
register or document in the custody of the registrar relating to such land
or charge" (counsel's emphasis). He cannot inspect the register relating F
to any other land, (g) The purpose of rule 77(1) is to negative the effect
of Page v. Midland Railway [1894] 1 Ch. 11, in so far as it made
covenants for title extend to incumbrances of which the purchaser had
notice. The rule does this by providing that a purchaser who has notice
of an interest or charge, which he can obtain either from an inspection
of the register or, in the case of an overriding interest, by having actual Q
notice, is to take subject to it. It does not extend to incumbrances of
which he has no notice and which cannot be found by inspection of the
register relating to land of the person authorising the inspection, (h)
"Title" in rule 77(l)(a) means the registered title of the covenantor. The
registration of the yellow land under a different title number and in the
name of a different proprietor did not for this purpose affect the title of
the defendants. H
On the cross appeal: the construction of the transfer dated the 7
September 1978. The judge was right to hold that on its true construction
the transfer purported to include the yellow land. In particular he was
291
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.)
A right (i) to say that he could derive no assistance from a consideration of
the Sykes contract; and (ii) in finding that the land intended to be
comprised in clause 2 was defined by reference to the plan and that the
words "being another part of the property registered at H.M. Land
Registry under Title No. P7608" were falsa demonstratio. The judge was
also right to accept the submission that it was permissible for the
purposes of construction to have regard to the fact that at all material
B times the south west boundary of the property in question was marked
on the ground by a fence, which followed the line shown on the transfer
plan and thus included the yellow land with the land remaining in title
No. P7608: see Willson v. Greene [1971] 1 W.L.R. 635.
The judge was right to reject the defendants' contention that the
covenant was that the transferor had power to convey "the subject
Q matter expressed to be conveyed" and that all that was expressed to be
conveyed by any transfer of registered land was such title as the
transferor in fact had. He was correct in concluding that section 60(1) of
the Law of Property Act 1925 cannot apply to a transfer of registered
land because the transfer itself does not pass any interest. He was also
right in relying upon the fact that the implied covenant is to the effect
that the grantor has "full power to convey the subject matter expressed
D to be conveyed" and that the defendants' argument ignores the words
"expressed to be" in the implied covenant itself.
Nicholas Warren for the defendants. The judge held, inter alia, as
follows: (a) on its true construction the transfer included the yellow
land; (b) rules 76 of the Land Registration Rules 1925 could not be
relied upon by the plaintiffs because the transfer, quoad the yellow land,
was not a "registered disposition" (a finding from which the plaintiffs do
not appeal); (c) On the basis that the plaintiffs could rely on section 76
of the Law of Property Act 1925, any implied covenant for title is
subject to rule 77 of the Land Registration Rules 1925. Accordingly, any
covenant implied in the transfer in relation to the yellow land is subject
to rule 77(l)(a) and therefore takes effect subject to "all charges and
other interests appearing or protected on the register." Since the yellow
F land was at all material times registered land, the purported transfer of
it by the defendants (who had no title at all to it) took effect subject to
the rights of the registered proprietor, which rights were within rule
77(l)(fl). The defendants support this conclusion.
On rule 77(l)(a) of the Rules of 1925: assuming the judge was
correct to proceed on the basis that section 76 of the Law of Property
Q Act 1925 applied to the transfer quoad the yellow land, his decision on
rule 77 was correct. It is not specified by the plaintiffs what they mean
by "the title with which the parties to the [transfer] were dealing." It
must be remembered that the yellow land was registered land and
accordingly comprised in a registered title at all material times. Initially
it was comprised in the same title as the remainder of the land
transferred by the transfer, but following its sale off by the defendants,
" it was removed from that title and registered within another title. The
plaintiffs are in this dilemma: either the transfer, as a matter of
construction, included the yellow land or it did not. On one hand, if the
transfer did include the yellow land then the title with which the parties
292
A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
were dealing must have included the title within which the yellow land A
was comprised: the plaintiffs' argument on construction necessarily
involves the heading of the transfer (which refers only to title No.
P7608) as not limiting the land comprised in the transfer. It must be the
case, on this construction of the transfer, that the parties were purporting
to deal with the title in which the yellow land was comprised. On the
other hand, if the transfer did not include the yellow land, no question
of any covenant for title being given in relation to that land arises.
That the defendants should not be liable in the present case is wholly
consistent with the principles underlying the land registration system.
One principle of the system is to give notice of all registered interests.
And it is only consonant with this principle that a transferee of registered
land takes subject to all registered interests. The yellow land was not
included in title No. P7608. The plaintiffs should have made a search of C
the index map and parcels index in order to ascertain whether the
yellow land was registered and if so in what title number. Had they
done so they would have discovered that the yellow land was registered
in a separate title number and would, had they asked the defendants,
have been informed by them that they, the defendants, were not the
registered proprietors of that separate title. If thereafter the plaintiffs p
had nonetheless received a transfer to the yellow land from the
defendants, they could hardly complain that that transfer would take
effect subject to the registered interest of the registered proprietor: they
would have notice that the transfer, which is simply an authority to the
Land Registrar to effect changes in the register, would not entitle them,
the plaintiffs, to be registered.
The title of a registered proprietor clearly appears on the register: it E
is in fact the most important entry on the register. The plaintiffs' case
must be that the rights (to use a neutral term) of that proprietor are not
a "charge or other interest." The defendants say that, whilst in the
present case the rights of the registered proprietor of the yellow land
may not constitute a "charge," they do constitute an "interest": "interest"
in the context of rule 77(l)(a) should be given as wide a meaning as p
possible; its meaning should not in any way be restricted by the word
"charge." It cannot be right to say that the registered proprietor of land
does not have an interest in the land. Other examples of "interests"
which are not charges or in the nature of charges are the interest of a
lessee who has a registered lease of registered land and the interest of a
squatter who has acquired title to registered land by adverse possession.
The defendants say that, contrary to the basis on which the judge
dealt with rule 77, section 76 of the Law of Property Act 1925 did not
apply to the yellow land at all. The judge's rejection of the contention
that section 76 cannot apply to any Land Registry transfer is not
challenged: but the defendants do contend that it is only where the
transfer in question is a "registered disposition" within rule 76 that
section 76 of the Law of Property Act 1925 applies. The judge decided H
(and this is not challenged by the plaintiffs) that rule 76 did not apply.
Accordingly, section 76 does not apply and no covenant for title was
incorporated so far as concerns the yellow land.
293
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.)
A On the question of the yellow land as the subject matter of an
implied covenant: the judge held that the yellow land was "expressed
to be conveyed" for the purposes of the implied covenant for title.
The judge did not go on to consider (as was argued before him) the
contention that the interest in the yellow land in relation to which
the covenant was given was only such interest as the defendants
actually had in that land. In unregistered conveyancing, it is possible
B to convey "such title, if any, as" the conveyor has in the land
conveyed. Even if he has no title at all, e.g. because he has previously
conveyed the land away or allowed a squatter to obtain adverse title,
there is no breach of the covenants for title. Force is conventionally
given to the covenants by the use of the words "in fee simple": these
words of limitation delineate the estate which the conveyor is
C purporting to convey. In registered conveyancing, a transfer contains
no words of limitation: it is therefore necessary to examine the
registered title to discover not only the physical site being transferred
but also the interest which is purported to be transferred: that interest
can at most be that title to the land with which the transferor is
registered. In the present case, therefore, the purported transfer of
the yellow land should, as it contains no words of limitation, be
D regarded as transferring the title to the yellow land with which the
defendants were registered (i.e. none) and so that the property
expressed to be conveyed for the purposes of the covenants for title
was such interest (if any) as the defendants had in that land. In the
result, there has been no breach of the covenant. [Reference was also
made to Borman v. Griffith [1930] 1 Ch. 493.]
On construction: (1) the heading on the transfer refers only to title
No. P7608. The court should be reluctant to include any other land in
the transfer unless compelled to do so by other provisions of the
transfer, especially in a case where the transferor does not in fact own
that other land. (2) The parcels clause reads "all that freehold property
edged with red on the plan annexed hereto being another part of the
property registered at H.M. Land Registry under Title Number P7608."
F Although the yellow land is included within the red edging, it is quite
possible to construe this description as excluding the yellow land: what is
transferred is land which is both edged in red and within title No.
P7608. On this construction, no part of the description needs to be
rejected: it is simply that the parcels do not include all of the land edged
red but only that part within the title number. The construction for
Q which the defendants contend (all the land edged red) involves rejecting
the description "being another part of . . . P7608" as incorrect. It is not
(and was not before the judge) contended that the primary description
of the parcel was "another part of the property" comprised in the title
number in the sense that that description could stand by itself. Rather,
the answer to the inevitable question posed by the judge, "Yes, but
what other part of the property registered under title No. P7608?" is:
" "That part of the title No. P7608 also comprised in the land edged red
on the plan." [Reference was also made to In re Strand Music Hall Co.
Ltd., ex parte European and American Finance Co. Ltd. (1865) 35 Beav.
153.]
294
A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
Rawson in reply. Can section 76 of the Law of Property Act 1925 A
apply? The trial judge held that the plaintiffs could not rely on rule 76
of the Land Registration Rules 1925, because the transfer was not a
registered disposition in relation to the yellow land, but he went on to
find that this did not matter because the plaintiffs could rely directly on
section 76 of the Law of Property Act 1925 itself. It was not therefore
necessary to appeal against the judge's finding that rule 76 could not be
relied upon. If that point is now to be raised by the defendants, the
following points should be emphasised. (1) The judge was correct in
holding that it is section 76 of the Law of Property Act 1925 which
operates to cause the covenant to bite. There is no need to rely on rule
76, which is merely concerned with the machinery of introducing the
necessary wording into a transfer. (2) Once the necessary words are
introduced into a registered disposition, there is no reason why the Q
operation of those words should be confined to what is actually carried
by the transfer. The transfer dated 7 September 1978 is a registered
disposition in that it carried all but the yellow land. The fact that it did
not operate as a registered disposition in relation to the yellow land is
no reason for saying that it cannot have contained an implied covenant
in relation to the yellow land. (3) To hold otherwise is to introduce
another discrepancy between registered and unregistered conveyancing. D
This should not be done and the two systems should so far as possible
operate on similar lines.
Cur. adv. vult.
30 October. The following judgments were handed down. E
DILLON L.J . This is an appeal by the plaintiffs in the action against
a decision given on 12 July 1985 by Mr. Donald Rattee Q.C., sitting as
a deputy High Court judge in the Chancery Division. There is also a
respondents' notice given by the defendants, respondents to the plaintiffs'
appeal, whereby they challenge the judge's conclusions on a number of _
points which he decided in favour of the plaintiffs. The case is concerned
with the implication of the traditional "beneficial owner" covenants for
title in a transfer of registered land.
The defendants were registered in April 1933 as the proprietors at
H.M. Land Registry with absolute title under title No. P7608 of an area
of land at Poole in Dorset. Over the years prior to 1978 the defendants
from time to time sold off parts of that land to various purchasers. G
When each sale was completed, the relevant purchaser was registered as
the proprietor, under a fresh title number, of the land comprised in the
transfer to that purchaser, and the Land Registry removed that land
from the title No. P7608. The defendants continued to be the proprietors,
under that title number, merely of the remainder of the land which they
had not sold off.
One of the pre-1978 sales, and the only one relevant to the issues in "
these proceedings, was a sale in 1969 of an area of land to a company
called Elkins & Larby Ltd. That was duly completed and at the Land
Registry the whole of the land comprised in the sale to Elkins & Larby
295
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.) Dillon L.J.
A was removed from the defendants' title No. P7608 and was registered in
the name of Elkins & Larby under a new title number. The filed plan of
title No. P7608 which provides the only description on the register of the
land comprised in that title was amended accordingly. Unfortunately,
when the land sold to Elkins & Larby came to be fenced off, on the
ground, from the land still retained by the defendants, someone made a
mistake and the fence was put in the wrong place. A small area of land
sold to Elkins & Larby was cut off, by the fence as actually erected,
from the rest of the land sold to Elkins & Larby, and was left apparently
part of the defendants' retained land. That small area of land is shown
coloured yellow on the plan annexed to the statement of claim, and has
been referred to throughout the proceedings as "the yellow land;" it is
very small, only about 10 ft. x 10 ft. in area, but unfortunately it has
Q been crucial for the plaintiffs' purposes.
In early 1978 a company called F.W. Cook (Mechanical Services)
Ltd. ("Cooks") entered into negotiations with the defendants to buy
part of the defendants' land, for development with industrial premises.
The judge found that all concerned with those negotiations, including
those acting for the defendants, proceeded on the footing that what the
defendants had to sell included the yellow land, as appeared to be the
D case from the line of the fence on the ground.
The outcome of those negotiations was a contract for sale between
the defendants and Cooks dated 10 July 1978. Whatever the intention of
the parties, it is common ground that the parcels in that contract as
drawn up do not include the yellow land. The solicitors who prepared
the contract did not use any fresh plan to describe the land which was to
be sold to Cooks. They described the land being sold as being the whole
of the property registered at H.M. Land Registry under the title No.
P7608 other than that part of the property which was comprised in a
particular lease in favour of a named third party. That did not include
the yellow land because the yellow land was no longer by then registered
under title No. P7608.
However, Cooks assigned the benefit of that contract to an associated
F company, Donron (Alberice Meters) Ltd. ("Donron"), and Donron sub-
sold part of what it thought it was acquiring to the plaintiffs. Accordingly,
when the time came for completion of the sale and sub-sale, it was
necessary to distinguish between the land sub-sold to the plaintiffs, the
land to be sold to Donron as successors to Cooks and not sub-sold
andbecause of covenants and exceptions and reservations not otherwise
Q material to these proceedingsthe land still retained by the defendants,
being the land comprised in the lease in favour of a third party
mentioned above.
The sale and sub-sale were accordingly completed by a transfer in
Land Registry form dated 7 September 1978. This transfer is headed:
"H.M. Land Registry. Transfer of Part of land comprised in Title
County and District Dorset-Poole Title Number P7608 Property
Industrial Site at Creekmoor, Poole, Dorset."
The transfer has attached to it a plan which shows an.area of land edged
in green, another area of land edged in red and another area of land
296
Dillon L.J. A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
edged in blue. The area of land edged in red has been referred to A
throughout these proceedings as "the red land." On the plan on the
transfer, part of the red land is shown hatched blue and another part is
shown coloured brown; those markings are irrelevant to these
proceedings. What is fundamental, however, is that the plan on the
transfer was prepared to show what all the parties thought they were
dealing with, as it appeared on the ground, and therefore on the plan
the red land included the yellow land, although in truth the defendants
had no title to the yellow land. The solicitors concerned did not notice
the discrepancyadmittedly small in areabetween the plan of the red
land on the transfer and the filed plan on the register of title No. P7608,
and everyone supposed that the whole of the red land, including the
yellow land, was comprised in that title.
By clause 1 of the operative part of the transfer the defendants as Q
beneficial owner transferred to Donron
"All that freehold property situate at Creekmoor in the County of
Dorset and shown edged with green on the plan annexed hereto
. . . and being part of the property registered at H.M. Land
Registry under title number P7608."
By clause 2, the operative clause for present purposes, the defendants as
u
beneficial owner transferred to the plaintiffs
"All that freehold property edged with red on the plan annexed
hereto being another part of the property registered at H.M. Land
Registry under title number P7608."
Clauses 3 and 4 contain exceptions and reservations and covenants for E
the benefit of "the residue of the land comprised in such title and
retained by the transferor shown edged blue on such plan." The three
areas are respectively referred to in the transfer as "the green land,"
"the red land" and "the blue land."
The plaintiffs bought with a view to putting up an industrial building
on what they thought they were buying, and having obtained planning p
permission they proceeded to do that. But the building in question was
designed to have one corner built on the yellow land. When they came
to register their title under the transfer, they discovered that they had
no title to the yellow land because, whatever the transfer had purported
to achieve, the defendants had had no title to the yellow land. They
therefore bought in the yellow land from a successor in title of Elkins &
Larby and by these proceedings they claim damages against the G
defendants for breach of the covenants for title which they say are to be
implied in the transfer because the defendants were expressed to transfer
to them "as beneficial owner."
With unregistered conveyancing, it is provided by section 76 of the
Law of Property Act 1925 that in a conveyance there are to be implied,
from the use of certain conventional phrases such as "beneficial owner,"
certain covenants for title which are set out in the various parts of
Schedule 2 to that Act. These replaced with amendments certain
provisions in the Conveyancing Act 1881. In effect the conventional
phrases were a form of statutory shorthand to avoid the need to set put
B
297
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.) Dillon L.J.
at length in every conveyance the covenants for title which for over a
hundred years before 1881 had traditionally been set out in every
conveyance.
The covenant to be implied, under section 76 and Schedule 2, in a
conveyance for valuable consideration by a person who conveys and is
expressed to convey as beneficial owner is, so far as material, a
covenant:
"That, notwithstanding anything by the person who so conveys or
any one through whom he derives title otherwise than by purchase
for value, made, done, executed, or omitted . . . the person who so
conveys, has . . . full power to convey the subject-matter expressed
to be conveyed, subject as, if so expressed, and in the manner in
which, it is expressed to be conveyed . . . "
The covenant is thus not an absolute covenant of good title. But since it
was by the defendants' own act in transferring the yellow land to Elkins
& Larby that the defendants lost their title to the yellow land, it is not
in doubt that, under the system of unregistered conveyancing, if the
defendants had on 7 September 1978 purported to convey the yellow
land as beneficial owner to the plaintiffs in fee simple, the defendants
D would have been in breach of the implied covenant for title above set
out and liable to the plaintiffs in damages.
So far as registered land is concerned, section 38(2) of the Land
Registration Act 1925 provided that rules might be made for prescribing
the effect of covenants implied by virtue of the Law of Property Act
1925 in dispositions of registered land. The relevant rules are the Land
Registration Rules 1925 (S.R. & O. 1925 No. 1093 (L.28)) and in
^ particular rules 76 and 77(1) which provide:
"76. For the purpose of introducing the covenants implied under
sections 76 and 77 of the Law of Property Act 1925, a person may,
in a registered disposition, be expressed to execute, transfer, or
charge as beneficial owner, as settlor, as trustee, as mortgagee, as
personal representative of a deceased person, as committee of a
F lunatic, or as receiver of a defective, or under an order of the court:
and an instrument of transfer or charge, and any instrument
affecting registered land, or a registered charge, may be expressed
accordingly, but no reference to covenants implied under section 76
aforesaid shall be entered in the register.
"77. Pursuant to section 38(2) of the Act, it is hereby provided
that(1) Any covenant implied by virtue of section 76 of the Law
of Property Act 1925, in a disposition of registered land shall take
effect as though the disposition was expressly made subject to(a)
all charges and other interests appearing or protected on the register
at the time of the execution of the disposition affecting the title of
the covenantor; (b) any overriding interests of which the purchaser
has notice and subject to which it would have taken effect, had the
H land been unregistered; . . . "
When this action came on for trial before the deputy judge, it was
agreed that he should only decide liability. If the plaintiffs succeeded in
establishing liability, damages should be referred to an inquiry.
298
Dillon L.J. A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
On liability, the first question he had to decide was whether the A
subject matter "expressed to be conveyed" (the wording in the covenant
in Schedule 2 to the Law of Property Act 1925) by clause 2 of the
transfer of 7 September 1978 did or did not include the yellow land.
This is a question of construction of the parcels in the transfer. On their
true construction, do those parcels purport to convey to the plaintiffs the
whole of the red land, or do they only purport to convey to them so
much of the red land as was actually then registered under title No.
P7608? The judge decided this point in favour of the plaintiffs, but his
decision on it is challenged in this court by the respondents' notice.
The next point which the judge had to consider at the trial was a
claim by the defendants that if on its true construction the transfer
purported to convey the yellow land to the plaintiffs, the transfer ought
to be rectified to exclude the yellow land. This claim for rectification the Q
judge rejected, and his rejection of it is not challenged in this court. He
held that it was the common intention of all parties that the yellow land
should be included in the transfer and be thereby transferred to the
plaintiffs.
There was, however, an alternative claim for rectification before the
judge. The plaintiffs claimed that if on their true construction the
parcels in clause 2 of the transfer of 7 September 1978 did not D
purportedly include the yellow land, the transfer ought to be rectified to
include the yellow land, so as to give effect to the common intention of
all parties. The judge made no ruling on this claim for rectification
since, on his construction that the parcels did include the yellow land,
rectification did not arise. In this court it is agreed between the parties
that if we hold, contrary to the judge's view, that on their true g
construction the parcels in the transfer do not purport to include the
yellow land, then, if the plaintiffs win on all other points argued on the
appeal, we should remit the case for decision at first instance on this
outstanding claim of the plaintiffs for rectification of the parcels in
clause 2 of the transfer to include the yellow land.
Apart from the question of construction and the rival claims for
rectification already mentioned, the judge had also to consider a range F
of other points taken by the defendants, particularly under rules 76 and
77 of the Land Registration Rules 1925, as a result of all or any of
which the defendants urged that the plaintiffs could not recover damages
in respect of the yellow land under the implied covenant for title. On all
but one of these other points the judge was against the defendants;
some have been argued in this court on the respondents' notice and to Q
these I will return. On one point, however, the judge was with the
defendants and against the plaintiffs; the result of that was that as the
plaintiffs had to win on all points to win the action, the action failed,
and was by the judge's order dismissed with costs.
The one point on which the plaintiffs failed arises under rule 77(l)(a)
of the Land Registration Rules 1925. Under that rule a covenant for
title implied in "a disposition of registered land" is to take effect as **
though "the disposition" was expressly made subject to "all charges and
other interests appearing . . . on the register at the time of the execution
of the disposition." The judge held that the interests there referred to
299
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.) Dillon L.J.
A included the interest of the true proprietor of the yellow land appearing
on the proprietorship register of the title numbernot P7608in which
the yellow land was in truth comprised at 7 September 1978. If the
covenant is indeed so limited, it would follow that the fact that the
defendants have no title to the yellow land gives the plaintiffs no claim
under the covenant for title because the covenant is to be treated as
subject to an express qualification as to the true proprietor's ownership.
But the plaintiffs say that the charges and other interests referred to in
rule 77(l)(a) are only those which appear on the register of title No.
P7608 itself since that is the only title to which the transfer refers and
the only title as to which the defendants had power to give the plaintiffs
authority to inspect the entries on the register.
Such being the scope and history of the proceedings, I turn first to
Q the issue of the true construction of the parcels in the transfer of 7
September 1978. This is perhaps a question of first impression. For my
part, however, I agree entirely with the conclusion of the judge that the
parcels do, as a matter of construction, include the yellow land, and the
yellow land is therefore part of the subject matter "expressed to be
conveyed" by clause 2 of the transfer. The factors which taken together
lead me to this conclusion are briefly as follows. First, the transfer is
D concerned to differentiate between three parcels of land, that to be
transferred to Donron, that to be transferred to the plaintiffs and that
retained by the defendants, and it does so exclusively by reference to
the plan on the transfer and the colouring on that planthe green land,
the red land and the blue land. The colouring on the plan is thus the
dominant description of each parcel, including the red land. Secondly,
g the other part of the description of the red land, "being another part of
the property registered . . . under title number P7608" in itself describes
nothing, since it does not say what further part is meant. Thirdly, where
parcels in a conveyancing document are described by reference to a plan
attached to the documents, the natural inference is that it was the
intention that anyone concerned should see from the document alone,
which means from the plan on it, what land the document was purporting
F to pass. But if in the present case the defendants are right in their
argument that clause 2 of the transfer imposed two cumulative conditions
and only purported to pass land which (a) was within the red edging on
the plan and also (b) was part of title No. P7608, that would not be so,
and the reader would have to look beyond the plan on the transfer to
the filed plan on the register to see what the parties were intending to
Q deal with. That would not, to my mind, be a natural approach. I prefer
the judge's conclusion that the effective description of the subject matter
expressed to be conveyed by clause 2 of the transfer is the red edging on
the plan on the transfer; the reference to property comprised in the title
number is subordinate, believed to be accurate, but to be rejected as
falsa demonstratio in so far as it is, qua the yellow land, inaccurate.
As for the defendants' arguments based on rules 76 and 77 of the
" Land Registration Rules 1925, the function of those rules is, under
section 38(2) of the Land Registration Act 1925, to prescribe the
effect, in registered conveyances of the covenants implied by virtue of
the Law of Property Act 1925. The first stage in this is that under rule
300
Dillon L.J. A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
76 a person may introduce the relevant implied covenants by being A
expressed, in a registered disposition, to transfer as beneficial owner.
There must, therefore, for the covenants to be introduced, be a
registered disposition. But in the present case there unquestionably was
a registered disposition, in that the transfer was a registered disposition
of at any rate so much of the red land as was still comprised in title No.
P7608. The "beneficial owner" covenants are therefore to be implied in
the transfer, which means that the relevant wording in Schedule 2 to the ^
Law of Property Act 1925 is to be read into the transfer.
One argument for the defendants, discussed on the respondents'
notice, is that the transfer is only a registered disposition of so much of
the red land as was comprised in the title number and it was not a
registered disposition of the yellow land, because the defendants had no
title to the yellow land; so it is said that the beneficial owner's covenants Q
are only implied qua the land which was effectively transferred by the
transfer, and not qua the yellow land. That, however, does not follow.
The registered disposition referred to in rule 76 is the equivalent in
registered conveyancing of the conveyance referred to in section 76 of
the Law of Property Act 1925, which under section 205 has to be a
conveyance of the property. But it is plain from the wording of section
76, as of Schedule 2 to the Law of Property Act 1925, that the D
covenants implied under section 76 apply not merely to the property
conveyed by the conveyance referred to, but to the whole of the subject
matter expressed to be conveyed by it. The same must apply to a
registered disposition. Therefore I find nothing in rule 76 that helps the
defendants.
I find it unnecessary to explore the question argued by the defendants p
as to whether the covenants for title are implied by virtue of section 76
of the Law of Property Act 1925 or by virtue of rule 76. It does not
matter. The wording to be applied is that the covenants implied by
section 76 are introduced by rule 76 into the registered disposition.
The scope of the covenants thus introduced is limited by rule 77(1).
The primary object, at any rate, of this is to simplify the form of
transfers in registered conveyancing, by making it unnecessary to refer F
expressly in every transfer to the matters covered by paragraphs (a) and
(b) of rule 77(1), viz. charges and other interests appearing or protected
on "the register" and overriding interests of which the purchaser has
notice. The crucial question is what is meant by "the register." It is very
probable that the draftsman of the rule only had in mind the simple case
where a registered proprietor transfers land of which he is the registered Q
proprietor; in that case the only relevant register would be the register
of the registered proprietor's own title. I find it hard to suppose that the
draftsman ever envisaged that solicitors would so arrange matters that a
registered proprietor would purport to include in one transfer land of
which he himself was the registered proprietor and also land to which he
had no title and of which someone else was the registered proprietor
under a different title number. These considerations, however, cannot ^
answer the crucial question in the present case.
The scheme of the Land Registry is that, though there is a global
register of all registered titles, there is also a separate register for each
301
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.) Dillon L.J.
A individual title. This appears particularly from the form of office copy
entries for the individual title which are regularly issued by the Land
Registry under rule 296 of the Land Registration Rules 1925 and which
under section 113 of the Land Registration Act 1925 are themselves
admissible in evidence to the same extent as the originals. The register
for the individual title itself comprises a property register, a proprietorship
register and a charges register for that individual title. The way title is
made to registered land on a sale is, under section 110 of the Land
Registration Act 1925, that the vendor furnishes the purchaser with an
authority to inspect "the register" and if required with a copy of the
subsisting entries in "the register" and of any filed plan. In that context
"the register" must mean the register in respect of the relevant individual
title of which the vendor is the registered proprietor, since under rule
Q 287 only the proprietor of land (or of any charge or incumbrance
thereon) can authorise anyone to inspect any entry in the register
relating to that land. The plaintiffs, therefore, as purchasers under their
contract with Donron which preceded the transfer of 7 September 1978
had no general right to inspect anything in the global register maintained
at the Land Registry in respect of all registered land; they could inspect
two things only: first, with the defendants' authority which was given,
D the entries on the register of title No. P7608, and, secondly, under rule
288, as contracting purchasers of adjoining land, the property register
and filed plan only of the title which included the yellow land and other
adjoining land.
The reference in rule 77(l)(a) to charges and other interests appearing
or protected on the register could not, in my judgment, extend to
g matters the subject of entries which the plaintiffs as purchasers could not
have inspected. Therefore "the register" referred to cannot mean the
global register of all registered land. Therefore I construe the reference
to "the register" in rule 77(l)(a) as referring only to the register of the
individual title, viz. in the context of the present case the title No. P7608
of which the defendants were the registered proprietors. It was that
proprietorship alone which under the scheme of the Act empowered
F them to make the disposition referred to in rule 77(l)(a) which I take to
be the same as the registered disposition referred to in rule 76.
I have considered whether in view of rule 288 the reference to "the
register" in rule 77(l)(a) ought to be construed to include also the
property register of the adjoining title which in fact included the yellow
land. But in my judgment though the special power to inspect the
Q property register and filed plan is given by rule 288, the emphasis of the
Act and rules as between vendor and purchaser is so strongly on
inspection merely of the register of the title of which the vendor is the
registered proprietor that the reference to "the register" in rule 77(l)(a)
ought to be similarly so limited. I therefore, with all respect to the
judge, disagree with him on the point on which he decided this action
against the plaintiffs.
H There remains, however, one further point taken by the defendants
under their respondents' notice. They point out that the transfer to the
plaintiffs in clause 2 of the transfer of 7 September 1978 does not
contain the words of limitation "in fee simple." They therefore submit
302
DiUon L.J. A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
that, even if the parcels in clause 2 purport to include the yellow land, A
the defendants, who had no contract with the plaintiffs, have never
undertaken to the plaintiffs to pass to the plaintiffs more than whatever
title they might have in the land the subject of clause 2. The title they
had happened to be the fee simple in relation to the red land in so far as
it was comprised in title No. P7608 and happened to be nothing in
relation to the yellow land, but that, the defendants submit, does not
give the plaintiffs any claim to damages under the "beneficial owner" ^
implied covenant, because the defendants never purported to transfer
more than whatever they actually had.
Section 60 of the Law of Property Act 1925, which has been referred
to in relation to this argument, provides that a conveyance of freehold
land to any person without words of limitation or any equivalent
expression shall pass to the grantee the fee simple or other the whole Q
interest which the grantor had power to convey in such land, unless a
contrary intention appears in the conveyance. Despite this, it has
remained the practice in unregistered conveyancing to include in the
habendum of the conveyance the words of limitation "in fee simple"
where it is intended that the fee simple will pass, or, where that is not
intended to state that the grantor conveys only such estate title or
interest (if any) as he may have in the land concerned. In the notes in D
Wolstenholme and Cherry's Conveyancing Statutes, 13th ed. (1972), vol.
1, 134, it is stated:
"Though words of limitation are no longer essential the words 'in
fee simple' will generally be employed in deeds to show the
intention of the parties and to facilitate the construction of the
implied covenants for title." E
The words of limitation "in fee simple" are, however, never used in
registered conveyancing. The form of transfer commonly used is
prescribed by rule 98 of the Rules of 1925 in mandatory terms and it
contains no words of limitation. What is clear, however, from section
18(1) of the Land Registration Act 1925 is that the only relevant power
which the defendants had as proprietors of the land comprised in title F
No. P7608 was to transfer the fee simple in possession. That consequently
was what they purported to doand didin relation to the part of the
red land actually comprised in that title. But clause 2 of the transfer
treated the whole of the red land alike. Therefore in my judgment they
equally purported to transfer the fee simple in the yellow land. That was
the manner in which it was expressed to be conveyed. Consequently the Q
implied covenant for title bites.
For my part, therefore, I would allow this appeal, set aside the order
of the judge and order an inquiry as to damages.
CROOM-JOHNSON L.J . I have read the judgment of Dillon L.J . and
agree with it. I wish to add only a few words on the question of the
proper construction of the parcels clause in the transfer. "
The judge rejected the defendants' submission that the words "being
another part of the property registered under title number P7608"
should be taken to be the primary definition of the land transferred,
303
1 Ch. A.J. Dunning Ltd. v. Sykes (C.A.) Croom-Johnson L.J.
A because it was quite impossible by those words to identify any boundaries
of the part of title No. P7608 intended to be transferred. He held that
there was then no answer to the inevitable question: Yes, but what other
part of the property registered under title No. P7608?
In the context of the document as described in the judgment of
Dillon L.J ., with its references to the green land and the blue land, the
plan of the red land was the primary description of what was expressed
" to be conveyed. It was clear and unambiguous, and was not referred to
as being "for identification only."
Nor would it be permissible to read into the description any
additional words so as to make it read "All that freehold property which
is both edged with red on the plan annexed hereto and another part of
the property registered . . . " where the wording as it stands is
Q straightforward.
I come to this conclusion simply on the wording of the transfer and
without stepping outside it in order to ascertain the intentions of the
parties. In my view the judge arrived at the right answer to the
interpretation of the transfer. Accordingly I also would allow the appeal
for the reasons given by Dillon L.J .
D
SIR JOHN DONALDSON M.R. It is common ground that if, as is
contended by the defendants in their cross-appeal, the judge erred in his
construction of the transfer, the matter would have to be remitted to the
Chancery Division in order that the plaintiffs' claim to rectification
should be considered. Nevertheless, it was also common ground that the
parties would be assisted if we gave judgment on the other matters
E which arise if the judge's construction was correct.
I agree with the judgment of Dillon L.J . in all respects, save as to
the construction of the transfer and therefore confine myself to explaining
why I disagree on that one point.
Registration of land titles has only a limited utility if it is not clear to
what land the registered title and other particulars relate. On the other
F
hand, it is obviously impossible to define and register boundaries for all
properties overnight or even, perhaps, "over-century." However, it is
possible to aim in that direction and rules 272 to 285 of the Land
Registration Rules 1925 point the way. There is to be a parcels index
based upon the Ordnance Survey map with provision for the boundaries
to be fixed (rule 276), although if this procedure is not adopted the filed
plan shall be deemed to indicate general boundaries only (rule 278).
G I mention this by way of preamble, because I think that it is not only
permissible, but is the natural and desirable course to adopt when
transferring registered land, to treat the primary unit as being the
registered parcel and, if this is not being transferred as a whole, to
indicate what part or parts is being transferred.
This seems to me to be precisely what happened on this occasion.
The defendants as the beneficial owners of the registered land constituting
registered parcel Dorset-Poole title No. P7608 were minded to dispose
of two parts of this parcel and there is absolutely nothing on the face of
the transfer to suggest that they intended to transfer any part of any
other parcel. (In fact, although this is not a permissible aid to
304
Sir John A.J. Dunning Ltd. v. Sykes (C.A.) [1987]
Donaldson M.R.
construction, we know that they did not so intend. Their error lay in A
believing that the "yellow l anda 10-foot squarewas part of the
parcel). In each case the land to be transferred is described in the
transfer as "being part" or "being another part of the property registered
at the Land Registry under title number P7608." The transferor had
then to identify each such part of the land comprised in the title and for
that purpose used a plan and edged the parts in green and red
respectively. ^
On the judge's construction of the transfer, the references to the
parcel number are largely unnecessary and are certainly subordinate to
the colourings on the plan. Furthermore, in relation to the land edged in
red, the words "being part of . . . P7608" are simply not correct, since
the 10-foot square "yellow land" included in the land edged in red is not
within the parcel. On my construction the whole of the land transferred Q
is, as the transfer states, part of the registered parcel and full effect is
given to the coloured edging as indicating the boundary between (a) the
part of the parcel transferred to Donron (Alberice Meters) Ltd., (b) that
transferred to the plaintiffs and (c) that (if any) retained by the
defendants. The unfortunate deviation of the red line across the
boundary of parcel P7608 and into another parcel is immaterial, since at
this point the boundary is defined by the registered particulars of parcel D
P7608 as a whole and not by the red line.
In the light of my view of the construction of the transfer, I would
have remitted the matter to the Chancery Division for consideration of
the plaintiffs' claim to rectification.
Appeal allowed with costs.
Cross-appeal dismissed.
Leave to appeal refused.
Solicitors: Barker Son & Isherwood, Andover; Trethowans, Salisbury.
P. M.
F